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Walter Piecyck of BTIG Research knows he’s taken a contrarian view by upgrading Apple and setting a $540 price target on the shares.

“Apple will soon report quarterly results which might not only miss its own guidance but could also include guidance for the upcoming June quarter that is $5 billion below consensus. Samsung, its toughest competitor, is announcing its latest Galaxy phone later today that is sure to dominate the headlines in the coming days and resurface questions of whether Apple’s reign has ended,” Piecyck said in a widely distributed blog post today.

“Meanwhile, the management team can’t seem to figure out what to do with its $150 billion cash hoard and the Apple TV feels like a distant dream. If that’s not enough, our fiscal 2013 EPS estimate is $3 below a consensus estimate that has fallen $10 since its peak and reflects no growth from last year.”

Add to that Apple seems to be on the defensive, with global marketing chief Phil Schiller speaking to a few reporters yesterday in rare interviews where he dismissed Samsung, Apple’s biggest competitor in the smartphone market, and slammed Google, Apple’s biggest competitor in mobile operating systems, as a “fragmented” OS that doesn’t deliver as good a user experience as the iPhone. The iPhone accounts for more than half of Apple's sales.

But Piecyck said Apple’s new product potential, including a larger-screen iPhone for the high-end of the market, a low-priced iPhone to win cost-conscious buyers in emerging markets and as yet-unknown products and services he’s betting will add $5 billion to Apple’s sales next year, make up for all the not so good news. There's also the fact that iPhone 4S owners in the U.S., who couldn't get a subsidized new iPhone because of the carrier's 20-month waiting period, will be eligible to upgrade to a new device later this year.

Besides, the stock – trading at less than 10 times earnings – is cheap.

“Our upgrade is, in part, based on the assumption that Apple will deliver a lower-priced iPhone into the market by the end of this calendar year…A product that addresses the more than 70 percent of global wireless subscribers that are unsubsidized pre-paid is necessary in order for Apple to grow its EPS next year. This is not rocket science and our belief is based on basic logic, not questionable ‘channel check’” or trips to Asia,” Piecyck argues. “The stock is reflecting low buy-side investor expectations, even if the sell-side has not yet caught up with their estimate revisions…Our price target is based on 12 times our fiscal 2014 EPS estimate of $45, which we believe is a reasonable multiple given the expectation of a return to growth.”

He’s not the only one who thinks so. “What I see is a reality that we’re doing really well, and it’s not always being reported,” Schiller told Bloomberg News yesterday. “Our products are innovative, and customers are buying them.”

Today, at least, investors seem to agree. Apple’s shares rose $4.15, or 1 percent in Nasdaq trading, to $432.50, after three days of decline.

“Investor sentiment has clearly shifted against “believing in the management team” with many investors increasingly becoming concerned that CEO Tim Cook and team have become too myopic about being a high-end phone manufacturer only,” Piecyk adds. “This is no longer about whether Cook can deliver a revolutionary new product into the market and has been reduced to doubts on whether he will even take advantage of obvious revenue opportunities like an entry level phone or mobile payments. We believe there are simply too many incremental revenue opportunities to risk not being long the stock before they are leaked or announced.

“If we are wrong and the management team is not ready to embrace broader revenue opportunities, we expect to become a vocal advocate for change.”

He's also counting on Apple to announce a new program for returning cash to investors by the end of this month. Stay tuned.